The electric utility industry is inexorably being forced by both regulators and new law into less regulated, more competitive and more conservation oriented business operations. The eventual success of this new direction will depend on whether the economics of electrical energy can be made to emulate those of a commodity. As a commodity the price of electricity would reflect 1) true costs, 2) supply and demand conditions, and 3) competition. It is the contention of this invention that electric energy can assume most of the economic properties of a commodity yet remain regulated, thus benefiting the public from the advantages of both the free and competitive marketplace and a totally responsible utility.
A method and system that seamlessly reflects cost, supply & demand, and competition through a continuously adjusted, demand-related price with capped gross revenues is the essence of this invention. The full system automates that pricing, and feeds back appropriate economic information to consumers. The complete system combines hourly consumer charges based on the demand related pricing with bonus/surcharge distributions.
By capping gross revenues it is possible to allow hourly prices to fluctuate, which makes possible commodity-like pricing of electricity while eliminating the frequent, complex & lengthy proceedings increasingly needed for rigidly regulating electric rates. Replacing rate regulation with process while retaining a modicum of regulation which would be needed to keep the integrated utility concept intact.
Capped gross revenues, when coupled with demand-related pricing, eliminates any revenue related disincentives for utilities to encourage conservation. Also those customers who practice conservation would see their electric bills drop while those who do not would see their bills rise. Hence a built-in market driven dynamic is created to encourage conservation.
This demand related pricing makes electricity much cheaper during low demand times and quite expensive during heavy demand times, particularly when combined with the bonus/surcharge distributions. This impels the more efficient utilization of utility assets by flattening load factor.
The introduction of this invention's demand-related pricing, when linked to a procedure for predicting the upcoming hour's prices for each utility in a pool, and the exchange of that information plus the amount of energy each utility would have available for export, or would need to import, sets up inter-utility competition. Lower priced electricity from a utility should result in greater exports, which further lowers the price until full capacity operation is realized at which point peak profits would be realized. Less efficient producers would earn greater profits if they would import cheaper power. Hence a competitive dynamic is introduced that would keep prices low within the framework of minimal regulation.
The preferred embodiment of this invention incorporates apparatus that generates, disseminates and displays information which permits a step-by-step introduction of an electronically simulated free market economic operation by regulated electric utilities and their associated power pool. The apparatus includes sensors, computers, and displays that are linked by telephone lines and radio transmissions. The sensors monitor individual consumer energy usage as a function of hourly calendar-time, power output from each utility's generators, and mean out-of-doors temperatures.
The computers receive, assemble and digest this data to determine a post facto hourly demand-related price which is later multiplied with each consumer's hourly energy consumption, correlated in calendar-time, for billing purposes. The premise underlying the demand-related price is that all fixed costs attributible to any generator slot in the utility's system is charged off only when it is online, the charge-off being inversely related to the on-line duty cycle and mean power, averaged over a month, and directly related to per diem fixed costs and the weighted ratio of mean power being delivered by each generator to total system mean power delivered during any given hour.
The computers also determine a bonus/surcharge distribution as demand approaches supply limits. This condition is predicted by out-of-doors temperatures. Whether a bonus or surcharge is to be distributed to any specific customer depends on the relative change in energy consumption by that customer as temperatures move beyond prescribed thresholds.
The computers also support inter-utility competitive pricing by posting for every upcoming hour, estimates of each utility's upcoming demand-related energy price, and how much energy it will have available for export or will need to import. Buy or sell decisions are then made, followed by post facto price recomputations and settlements.
These computer functions are defined by mutually supportive algorithms that are unique to this invention. The algorithms are described by mathmatical, verbal, and flow diagram expressions presented in the detailed description of invention.
An informational feedback loop that incorporates the consumer is a necessary ingredient of the system. An important function of the feedback is that it serve as a low cost, easily understood teaching tool. The preferred embodiment for this feedback would have two formats, one a printed, post facto, matrix-like bill which is mailed to each customer, and the other being real-time electronic information disseminated by radio transmissions to each consumer. Two digits are transmitted, one being a real-time-price index for the current hour, and the other a bonus/surcharge index. The approach described for implementing the real time feedback lends itself to time sharing of existing commercial broadcast transmitters, and to the adaptation of room clocks into dual function time-telling and real-time economic feedback terminals.
This system can be superimposed onto an operational utility with little disruption, since it can be introduced in a z; step-by-step manner. It does not have to encompass all customers, but could be initially restricted to certain service classifications. It also can be implemented one economic function at a time and still be effective.
The various aspects and advantages of this invention will be more fully understood from a consideration of the following detailed description in conjunction with the accompanying drawings in which: